The coronavirus pandemic has brought about several government restrictions on movement and association among others.
This is greatly interrupting business contracts and obligations. For instance, some businesses have agreements in place for the supply of raw materials from other countries and this pandemic has hampered their operations.
More so, it has a ripple effect as they are unable to also fulfill several other contractual obligations. Several scenarios abound. Nevertheless, such businesses need to ascertain whether they will be excused for a delay in the performance or for non-performance of their contractual obligations. Also, whether their contracts can be rightly terminated.
A thorough assessment of the Force Majeure provisions of a contract will be instructive. This is necessary in order to determine whether a valid assertion of force majeure can be made. For contracts without a Force Majeure clause or an incomprehensive Force Majeure clause, an assessment of the peculiar facts could enable a business rely on Frustration as a ground for its inability to perform the contract.
However, a mistaken assertion of Force Majeure or Frustration could amount to a breach or anticipatory breach of contract. Hence, it is necessary that a thorough assessment be carried out.
Force Majeure
This is a clause commonly inserted in contracts, to protect the parties, for instances where they delay or are unable to fulfill their contractual obligations, as a result of events beyond their control.
The wordings of the Force Majeure clause in a contract will determine whether a situation like the Corona virus pandemic itself or situations related to government restrictions to contain the pandemic, will constitute a Force Majeure. It is necessary therefore to properly consider whether the coronavirus pandemic and attendant events fall into the category of events specifically mentioned in your contract as constituting a Force Majeure Event.
If the Force Majeure Clause in your contract covers the event, you must carefully consider whether the performance of your obligations under the contract has actually been delayed or rendered impossible by the Corona virus pandemic.
Before invoking the clause, it is imperative that you take cognizance of the consequences of Force Majeure as stated in your contractual agreement. Most clauses will state that neither party will be liable for a delay or failure to fulfill their obligations. Ensure that the consequence of invoking the clause as contained in your Contract, is in the best interest of your business.
Upon ascertaining that a Force Majeure Event has arisen, the notification requirements contained in the Force Majeure clause should be complied with. You should comply with the notice period as well as the mode of notification, as contained in the Agreement.
Some Force Majeure clauses require parties to take steps to mitigate the Force Majeure Event. Thus, where possible, ensure you take all reasonable mitigation measures.
Frustration
Where a contract does not contain a force majeure clause or where the clause does not cover the situation that has arisen, reliance can be made on the doctrine of frustration.
This is a legal principle that seeks to discharge a party from the fulfillment of its contractual obligations, where a change in circumstances makes it impossible for a party to fulfill its obligations. Anu Ogunro is the managing partner, Top-Notch Legal Practitioner and can be reached on [email protected]
